CHNComp gains despite rising geopolitical tensions

Chinese indices rose over 2.0% on Monday, partly recovering from a sharp drop in the prior session, despite rising geopolitical tensions between Beijing and Washington. Chinese top diplomat Wang Yi called the US reaction to the balloon it shot down "hysterical," while his counterpart, Anthony Blinken, called the balloon's entry into his country's airspace "irresponsible." Wang Yi, is due in Moscow and possibly for a meeting with Russian president, Vladimir Putin, while President Biden visited Kiev and promised further support for Ukraine. North Korea, meanwhile, conducted an intercontinental ballistic missile test. 

On the other hand  investors grew increasingly optimistic about China’s economic recovery. Goldman Sachs strategists expect an over 20% gain in Chinese stocks by year end as the country’s economic reopening delivers windfall profits for businesses, as reported by Bloomberg. Meanwhile, IMF Senior Representative in China said the nation will continue to be one of the major countries to see the strongest growth in 2023. At the same time, the People’s Bank of China left its 1-year and 5-year prime loan rates unchanged for the 6th month as rising interest rates in other major economies left it little room to ease policy.

From a technical point of view, CHNCOMP pulled back from major resistance at 7765 pts at the end of January, which was indicated by the Momentum indicator. This level is marked with 38.2% Fibonacci retracement of the downward wave started in February 2021 and as long as price sits below, main sentiment remains bearish. Nearest support to watch can be found at 6700 pts which coincides with 23.6% retracement and 200 SMA (red line).

CHNComp, D1 interval. Source: xStation5